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Arab News
2 days ago
- Business
- Arab News
Moody's upgrade underscores Pakistan recovery, reforms fueling stability — central bank governor
KARACHI: Pakistan's central bank said on Thursday recent credit rating upgrades underscored the country's improving macroeconomic outlook, as Governor Jameel Ahmad used an Independence Day address to stress economic resilience and reforms. The remarks came a day after Moody's Investors Service upgraded Pakistan's sovereign rating, citing stronger foreign exchange reserves, a current account surplus and fiscal consolidation. Analysts said the move could ease access to global capital markets and attract investment as Pakistan looks to consolidate gains under its $7 billion IMF program approved in September 2024. 'International credit rating agencies have upgraded Pakistan's ratings in recognition of recent measures which will help unlock foreign investment opportunities,' Ahmad said at the State Bank of Pakistan's (SBP) flag-hoisting ceremony in Karachi. Ahmad noted the dramatic improvement in inflation, which had soared to 38 percent in May 2023 before easing to 11.8 percent by May 2024 and reaching a record low of 3.2 percent in June 2025. 'Our monetary policy remains geared toward maintaining the hard-earned gains in price stability, while ensuring inflation remains within 5–7 percent,' he said, adding that this would help 'unlock broader economic and business opportunities.' The SBP has reduced its policy rate in seven steps from 22 percent to 11 percent since June 2024 in line with the improved outlook. External accounts have also strengthened, with reserves nearly tripling to $14.5 billion by the end of FY25 from $4.4 billion two years earlier. Ahmad said the turnaround was achieved through a $2.1 billion current account surplus – the first in 14 years – and record remittances of $38.3 billion from overseas Pakistanis, without adding to external debt. The governor also highlighted SBP's digital push, including spinning off the Raast instant payment system into a separate subsidiary, easing account opening procedures and modernizing payment infrastructure to widen financial inclusion. He said such steps would particularly benefit women and small businesses. Pakistan's economic rebound follows two years of crisis, when the country averted default through IMF disbursements, painful reforms, and strict fiscal consolidation. The IMF has urged Pakistan to maintain exchange rate flexibility, broaden its tax base and strengthen the energy sector to lock in recent stability.
Arab News
3 days ago
- Business
- Arab News
Pakistan's central bank sees FY26 growth up to 4.25 percent, trade gap to widen
KARACHI: Pakistan's central bank on Wednesday projected economic growth of up to 4.25 percent in the current fiscal year but warned the trade deficit would widen, even as reserves are set to climb on the back of steady remittances and foreign inflows. The forecast comes as Pakistan implements reforms under a $7 billion International Monetary Fund (IMF) program approved in September 2024, which has helped stabilize the currency, ease inflation and restore investor confidence. The IMF deal is tied to fiscal consolidation, energy sector reforms, and measures to boost exports, part of a broader effort to strengthen macroeconomic stability after years of chronic external imbalances. The economy returned to moderate growth last year, aided by improved agricultural output, lower global commodity prices, and a series of policy rate cuts totaling 1,100 basis points since late 2024. Inflation has eased from record highs, while the rupee has stabilized against the dollar after a crackdown on the illegal currency market. 'With the policy rate kept unchanged at 11 percent in the MPC meetings in June and July, the MPC expects the real policy rate to be adequately positive to stabilize inflation within the medium-term target range,' the State Bank of Pakistan (SBP) said in its Monetary Policy Report (MPR) released on Wednesday. 'In the external account, the MPR expects the trade deficit to widen further and, notwithstanding continued expected growth in workers' remittances, result in a current account deficit of 0–1 percent of GDP in FY26,' it added. The central bank said 'projected financial inflows, coupled with continued SBP interbank FX purchases, would support further buildup in SBP's FX reserves, which are projected to rise to $15.5 billion by end-December 2025.' Economic activity, it said, was 'projected to gain further traction, with the impact of the earlier reductions in the policy rate still unfolding,' and real GDP growth was expected to range between 3.25 percent and 4.25 percent in FY26. The MPR also flagged 'potential external and domestic risks to the baseline macroeconomic outlook' and included analysis of the lag in monetary policy transmission, comparisons with global central bank decisions, and the SBP's use of alternative data and machine learning to fill gaps in labor market and agriculture statistics.
